PUBLIC LAW 94-455—OCT. 4, 1976
90 STAT. 1539
"(1) a corporation engaged in the trade or business of farming, or " (2) a partnership engaged in the trade or business of farming, if a corporation is a part n e r in such partnership, shall be computed on an accrual method of accounting and with the capitalization of preproductive expenses described in subsection (b). T h i s section shall not apply to the trade or business of operating a nursery or to the raising or harvesting of trees (other than fruit and nut trees). " (b) PREPRODUCTIVE PERIOD E X P E N S E S. —
" (1) IN GENERAL.—For purposes of this section, the term 'pre- "Preproductive productive period expenses' means any amount which is attribut- period able to crops, animals, or any other property having a crop or expenses." yield during the preproductive period of such property. " (2) ExcEPiTONS.—Paragraph (1) shall not apply— " (A) to taxes and interest, and " (B) to any amount incurred on account of fire, storm, flood, or other casualty or on account of disease or drought. " (3) PREPRODUCTIVE PERIOD DEFINED.—For purposes of t h i s sub-
section, the term 'preproductive period' means— " (A) in the case of property having a useful life of more than 1 year which will have more than 1 crop or yield, the period before the disposition of the first such marketable crop or yield, or " (B) i n the case of any other property, the period before such property is disposed of. For purposes of this section, the use by the taxpayer i n the trade or business of farming of any supply produced in such trade or business shall be treated as a disposition. "(c)
EXCEPTION FOR SMALL B U S I N E S S AND F A M I L Y CORPORATIONS.—
For purposes of subsection (a), a corporation shall be treated as not being a corporation if it is— " (1) an electing small business corporation (within the mean26 USC 1371. ing of section 1 3 7 1 (b)), " (2) a corporation of which at least 50 percent of the total combined voting power of all classes of stock entitled to vote, and at least 50 percent of the total number of shares of all other classes of stock of the corporation, are owned by members of the same family, or " (3) a corporation the gross receipts of which meet the requirements of subsection (e). "(d)
MEMBERS OF THE S A M E F A M I L Y. — For purposes of subsection
(c)(2)" (1) the members of the same family are an individual, such individual's brothers and sisters, the brothers and sisters of such individual's parents and grandparents, the ancestors and lineal descendants or any of the foregoing, a spouse of any of the foregoing, and the estate of any of the foregoing, " (2) stock owned, directly or indirectly, by or for a partnership or t r u s t shall be treated as owned proportionately by its partners or beneficiaries, and " (3) if 50 percent or more in value of the stock i n a corporation (hereinafter in this paragraph referred to as 'first corporation') is owned, directly or through paragraph (2), by or for members of the same family, such members shall be considered as owning each class of stock in a second corporation (or a wholly owned
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